"It is not just the attractiveness of debt. In the last six to nine months, banks have been going slow on credit disbursements, especially in the infrastructure sector, because of regulatory gaps," said Hemant Kanoria, CMD of Srei Infrastructure Finance.

The fund, which will take the MF route, is expected to make investments of about Rs 25 crore for up to five years, he said.

Debt offerings in India typically use instruments like non-convertible debentures, or are routed through external commercial borrowings while lending to corporates.

"The government is looking to stimulate the secondary market for debt, and we are looking to take advantage of that. We are in the process of formalising the scheme, and the fund will be opportunistic in its investments," Kanoria said.

Given the current depressed investment climate in the country, fund houses believe they can promise returns of about 15% to their investors.

This opens up a new asset class for limited partners in equity funds who have been struggling with low returns from private equity and VC that is estimated to have dropped to between 8% and 12%, according to industry executives.

"Over the last two to three years, equity has not gone anywhere. Returns to investors have been quite insufficient, and which has led to stress in their own business," Rajesh Saluja, chief executive and MD at ASK Wealth Advisors said.

A number of global buyout funds, including Kohlberg Kravis Roberts and Apollo Global Management, are reportedly gearing up to launch credit funds of $750 million to $1 billion, as they look to funnel cash to a liquidity-starved corporate India.